New Zealand shares fell slightly after briefly hitting a five-year high yesterday, with some analysts claiming there is a case for New Zealand equities to go higher if the forthcoming earnings season surprises with stronger than expected results.

The NZX50 Index of leading stocks was down 4.148 points, of 0.99 percent, at 4,200.289. Turnover remained relatively light, at $66.895 million. Within the index, 17 stocks rose, 18 stocks fell, and 15 were unchanged.

Among losers on the day was Fonterra Shareholders Fund, which dropped another 1.12 percent to $7.05, its lowest point since December 18, as the world's largest dairy exporter continued to deal with the fallout from the discovery of minute traces of a nitrate inhibitor, known as DCD, in milk powder products.

A Beijing-based New Zealand businessman and commentator, David Mahon, says the issue has received no significant coverage in Chinese news media.

"As long as New Zealand is clear and outspoken in terms of the facts to date, and it seems the Prime Minister's (John Key) statement was straightforward and unequivocating, that is what people will listen to. You don't make statements like that unless you have the science to back it up," Mr Mahon told Fairfax Media.

Elsewhere, Milford Asset Management portfolio manager Mark Warminger argued that the current forward price/earnings ratio on New Zealand stocks, at around 15.5, looked high and that it was "simple to conclude that New Zealand equities are therefore over-valued".

"But such simple analysis does not take into account where we are in the economic cycle."

After several years of unexciting but stable earnings, analysts had become "over-cautious and we believe that earnings are likely to exceed expectations over the next year as the economic recovery continues".

Oceana Gold fell furthest, down 2.69 percent to $3.25, Steel & Tube was off 1.53 percent to $2.58, and Fletcher Building was among gainers, edging up 0.54 percent to $9.26.

(BusinessDesk)

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